Last week, Papa John's, the No. 4 pizza chain in the U.S., lost a major battle in its war against industry leader and archrival Pizza Hut.
After more than three weeks of testimony in federal court in Dallas, which included dough experts and sauce demonstrations, a jury sided with Pizza Hut in its claim that Papa John's misled consumers with its slogan and corporate mantra, "Better ingredients. Better pizza."
At the same time, Pizza Hut did not emerge blameless. The jury found that the chain, a unit of Tricon Global Restaurants, misled viewers via two of its own TV spots that claimed Papa John's used old dough.
The war isn't over yet.
The eight-person jury is set to reconvene Nov. 29 to determine monetary damages in the case, which was filed in August 1998 in Dallas. Pizza Hut is seeking $12.5 million, and wants Papa John's to be blocked from using the disputed slogan.
It is still used in all TV spots and throughout the 1,900-unit chain in marketing materials. The judge, Wm. F. Sanderson Jr., is expected to rule on the slogan by mid-December.
Pizza Hut and Papa John's declined to comment because of a court-imposed gag order.
Papa John's advertising agency, Fricks/Firestone, Atlanta, and Pizza Hut's agency, BBDO Worldwide, New York, referred calls to their clients. Shrum Devine Donilon, a Washington agency that specializes in political ads, not BBDO, created the disputed Pizza Hut commercials.
This is the latest of many nasty skirmishes between the two chains in the highly competitive $22 billion U.S. pizza business.
While Pizza Hut was the first to file suit, Papa John's, the fastest-growing chain in the business, in January followed with a counterclaim over deceptive advertising. The jury was asked to consider both company's charges.
The TV ad battle heated up in 1997 when Papa John's aired a TV spot featuring its brash founder, John Schnatter, claiming consumers preferred his chain's tomato sauce over Pizza Hut's. He said Pizza Hut used "remanufactured paste," while Papa John's used fresh tomatoes picked from the vine.
This came as Pizza Hut, then struggling, unleashed a major turnaround initiative aimed at boosting food quality.
Another Papa John's ad featured Pizza Hut Co. founder Frank Carney in his new role as a Papa John's franchisee.
At press time, it was unclear which ads were brought before the jury.
WHAT'S AT STAKE
Industry observers last week said Papa John's, far smaller than Pizza Hut, also has more to lose. Should it be forced to stop using its slogan, it not only will have to retool its advertising campaign and strategy but also will be forced to make changes in everything from pole signs outside its restaurants to napkins, uniforms and pizza boxes.
Papa John's spent $28.5 million in measured media last year, while Pizza Hut spent $131 million, according to Competitive Media Reporting. Papa John's, founded in 1985, posted $1.2 billion in sales last year. Pizza Hut, with 8,400 units, had sales of $4.8 billion.
BancBoston Robertson Stephens analyst F. Fitzhugh Taylor III, said he doesn't expect a long-term impact on either chain.
"It doesn't change the fundamental value of Papa John's," he said. "Some restaurant chains change their slogans annually, so I don't think this is a big deal. At worst, it forces Papa John's to incur some short-term marketing [expenses] it hadn't planned on."
Patrick Coyne, an intellectual property attorney with Washington-based Collier, Shannon, Rill & Scott, said he is not surprised by the outcome. "Sophisticated advertisers have always known that this is an area that is perilous," he said. "In comparative ads, the marketer must be able to prove its claim, a difficult task for a slogan such as `Better ingredients. Better pizza.'
"You're attributing the property of being a better pizza to better ingredients," he said. "That raises the question of better than whose?"